Coupon incentive-based demand response (CIDR) in smart grid

A new type of demand response (DR) program referred to as coupon incentive-based demand response (CIDR) is presented as an alternative to residential consumer demand response programs. Enabled by pervasive mobile communication capabilities and smart grid technologies, load serving entities (LSEs) could offer residential consumers coupon incentives to reduce power consumption in a given period of time, offsetting potential losses due to wholesale electricity price spikes. In contrast with real-time pricing or peak load pricing, CIDR program maintains simple flat retail rate structure on consumer side while providing effective voluntary-based incentives for DR. An iterative procedure is designed to realize the real-time interaction between the independent system operator, the LSEs and consumers. CIDR can increase the profit of the LSEs and achieve almost the same social welfare as under the real-time pricing scheme. CIDR is compatible with current flat retail rate pricing scheme so the implementation is straightforward. A numerical experiment demonstrates the potential benefits of CIDR programs.